It's been a long time since an IPO generated as much buzz - both positive and negative - as Groupon has done with its $12B IPO today. With the price now around $30 that is a valuation of around $20B. Bigger than Chipotle, Sirius XM, Ralph Lauren, Netflix, and Research in Motion, investors are showing a huge appetite for the daily deals company that didn't exist three years ago.
I've read a good bit about the history of the company and what makes it unique, their business strategy, notably from this very thorough profile:
The biggest and most prescient criticism of the business model is that it is easy to copy. This article addresses their handling of this early on:
"We realized the main barrier to entry is going to be scale. So we wanted to get to as many cities as we can because we saw direct, outright, verbatim copies of what we were doing, popping up all over the place pretty quickly. We said we can either go chase them and beat them back and fight them legally, or race ahead and do what we do, as best we can. So the choice was to not look back, and try to be better and bigger."
So they have an installed base around 140 million users. It is not going to be easy to be Groupon overnight. But they just don't have anything particularly unique. I think they're very savvy and it will take time but eventually it will lose its lustre as the market gets very crowded.
There are some well thought-out rebuttals to the criticism of Groupon here:
Mainly I am bullish on the company's prospects but I feel that it's been caught up in an IPO fever that significantly overvalues the company. Perhaps some day a valuation of $20B will not be absurd, but today, it is. It also seems to be notoriously dangerous lately to buy in on IPO day.
This is an interesting rebuttal of the idea that anyone can start a Groupon - which is not my position at all, I am suggesting a Google or Facebook has a better chance of successfully competing with them (though after this IPO, Groupon is pretty deep-pocketed):
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